One of the crowning achievements of Dodd-Frank has been the Volcker Rule, or the rule which bars banks from undertaking trading on their own account. The US’ OCC this week took the first step to loosening the rule, which is hated by those on Wall Street. The leader of the OCC, appointed by President Trump, has opened a request for comment, which is a prelude to a possible loosening or overturning of the rule. Consensus has apparently been formed in Washington, across parties, that the Volcker Rule needs to be simplified in order to be more effective.
FINSUM: The devil has always been in the details with regards to the Volcker Rule, because the difference between trading one’s own account, and building up inventory for future client trades can become very blurry, especially in bond markets. The rule has certainly hollowed out corporate bond liquidity.